Growth is one side of the equation. Stability is another. At NAREIT Scott pointed out that multi-family is one of the most stable commercial markets, and one that has a built-in hedge against inflation (insofar as leases are renewed annually). The loan business is "lumpy". It surges and wanes, especially as prior surges in loans come back to the market, as should happen over the next four years. Multi-family, by contrast, is relatively stable. People need a place to live.
The RE portfolio should help to moderate future volatility.
"Danger"? It is a good development. More distance between home value assessment and taxation for school budgets and local government services leads to more 'tax the rich' thinking. Also, less home ownership means less individalism. Works for me and mine!
The big question is whether this will be a long term trend. I frankly don't think it will be. Market trends frequently reverse over time, but it could easily take anywhere from 20 to 50 years for the reversal to occur. The last major cyclic change in terms of residential home ownership occurred in the 1950's (60 years ago) when the dawn of mass manufactured homes (e.g. Levittown) made home ownership possible for a generation of renters that really no hope of owning until that innovation brought the price of ownership down. You probably have to go back to the 1890's to find the next prior shift, as farmers moved to the cities for factory jobs.
Bottom line, if this is beginning of the same kind of multi-generational shift, multi-family housing is going to be a big business for a long while.
He overstates somewhat, but the balance between owning in renting is clear shifting. There are a lot more renters now than there were eight years ago, and that's likely to be a trend for a while.
What he doesn't say is that the population is growing faster than available housing. If the shift continues there is going to be a lot of demand for new multifamily construction. The moment when that is happening is the right moment for RAS to sell its existing multifamily inventory. Prices usually peak as shortages force higher cost new construction.
Will RAS be renting finally all their vacant lots? How much extra for a tarp? And a bucket to defecate in? And a faux garage? Will renters be able to display an American flag (You know, of the Stars and Stripes variety)? More questions to follow.
I pay quite a bit of money when I rent an ocean front house for my vacation;-)
The beach front land that RAS owns is interesting property. assuming that they only lent 50 to 60% against the raw land, it could be a winner for RAS, despite it being a long haul holding with quite a bit of uncertainty. Values are likely to be similar to when RAS made the loan, BUT they have not been collecting the 5%+ interest that they should have been earning low these many years...............so, let's say they lent 60% LTV five years ago..............assuming values are back to what they were at the time of the loan............RAS is now at 85% LTV if they had been accruing interest all of that time.............of course they have not been accruing interest, so if the scenario is as I have described, RAS has a nice gain that they might be able to realize in the next two years.........or they own beachfront land for forever:-)
LOL. There are a few vacant lots. RAS may get a little income from the St. Pete Beach docks, but they are a long term asset. What matters now is the 93% occupancy and increasing rents RAS (and IRT) have on their large portfolio of multifamily apartments. In 1Q they generated more gross income than RAS pulled in Investment Interest Income ... and Investment Interest Income was up from 3Q.
The question you need to be asking yourself right now is why you didn't cover at a profit when you could get it. ++CCClol;